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How Big Is Nvidia's (NVDA) Share of the Cryptocurrency Market?

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Once just a popular brand among diehard PC gamers, Nvidia (NVDA - Free Report) has stepped into the spotlight over the past few years and is now one of the most popular tech companies on Wall Street. The stock is an interesting option not only because its graphics chips are still a hot commodity to its core audience, but also because the emergence of several news businesses has created unlimited growth potential.

Thanks to a variety of new applications for its GPU and SoC devices, the Santa- Clara, California-based processor manufacturer is now a major player in many high-growth markets, including datacenters, self-driving cars, and cryptocurrency mining.

But of course, not all of these new businesses are made the same. While datacenter demand continues to rise and self-driving cars approach their commercial debut, cryptocurrencies have tumbled from their New Year highs and appear more volatile than ever.

Still, cryptocurrency mining—a process that sees users rewarded with new coins or tokens when they volunteer their own computing power for blockchain maintenance—can be profitable when executed correctly, and miners continue to pick GPUs made by Nvidia and rival AMD (AMD - Free Report) to power the top-end computers needed for the task.

Nvidia has been reluctant to acknowledge the new business it has seen from crypto miners, with management seemingly eager to guard itself from the volatility associated with cryptocurrency market. In fact, Nvidia CFO Colette Kress told analysts that cryptocurrency’s contribution to the company’s business was still “difficult to quantify” as recently as the Q4 2018 conference call.

But that task has apparently gotten easier, or Nvidia has finally decided to pull the curtain back a little more. Speaking to analysts during the firm’s latest earnings conference call—in the wake of its solid Q1 2019 report—executives like Kress and CEO Jensen Huang were much more detailed with their answers to crypto-related questions.

“Cryptocurrency demand was again stronger than expected, but we were able to fulfill most of it with crypto-specific GPUs, which are included in our OEM business at $289 million,” Kress said. “Looking into Q2, we expect crypto-specific revenue to be about one-third of its Q1 level.”

Nvidia reported total quarterly revenue of $387 million in its OEM segment—up nearly 150% from the prior-year period—so the company is effectively saying that about 75% of this business came from crypto-specific processors.

Nvidia’s decision to market crypto-specific GPUs speaks to the concern that demand from miners might cause supply issues for traditional customers like gamers. But with nearly $300 million in sales in the quarter—and likely more, since miners could still buy gaming GPUs—Nvidia is dominating its key competitor in this market, AMD.

Christopher Rolland, an analyst from Susquehanna Financial, touched on these points in the conference call, eventually asking, “Is there a pricing dynamic that's allowing you to have such share there, or do you think it's your competitors that don't know what's actually being sold to miners versus gamers?”

Huang fielded these questions, describing his company’s efforts to point miners toward Nvidia’s crypto-specific solutions and reminding analysts that fulfilling demand is “just not possible” but stopping short of speculating what Nvidia is doing better than competitors right now.

But the numbers don’t lie. If AMD’s estimation that 10% of its sales in the most recent quarter came from crypto, that means the company saw about $160 million in revenue from that market. If Nvidia truly does control two-thirds of this market, it is clearly doing something right.

Of course, just how big of an impact that two-thirds slice will have in the future remains to be seen.

Want more market analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!

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